chart illustrating the large gap in US jobs

Job Creation Solutions

In my earlier post on crafting more jobs, I hinted at the idea that diversifying both start-up teams and types of industries was key to job creation. I also stated that SBA backed lending is insufficient to fill the job gap, estimated at 11 million jobs by the Brookings Institute.

chart illustrating the large gap in US jobs

2006 – 2009 Comparison of Jobs Created/Retained as a result of SBA Funding:

SBA Jobs Created/Retained

Source: SBA Summary of Performance and Financial Information FY 2009.

Note that in both 2008 and 2009 SBA creation/retention numbers are significantly lower than 2006/2007 in spite of additional funding available to banks through the American Recovery and Reinvestment Act of 2009 to guarantee loans.

Why? The 22 largest banks, including Wells Fargo, Bank of America and Chase cut more than $1 billion dollars from their small business lending balance. Smaller, community-based banks have continued to underwrite SBA loans, and if H.R. 5297, the Small Business Jobs and Credit Act of 2010 passes, it would provide $30 billion to banks with less than $10 billion in assets that could generate $300 billion in new lending.

Action item: contact your elected representatives and ask them (nicely) them to allow the Small Business Jobs and Credit Act to come up for a floor vote. Encourage them to support it so businesses have capital to expand and add jobs. Washington DC has bounced back much quicker than other parts of the country, so they may need to be reminded that additional efforts are necessary.

Need a visual for how steep the drop-off has been? Here is a graph based on numbers of loans closed, 2006 – 2009. Note how 7a loans fell off the cliff after 2007:

SBA Lending 2006 - 2009

Source: SBA Summary of Performance and Financial Information FY 2009.

Again, government backed lending for start-ups is a key piece of the puzzle, but there are additional solutions which could add momentum to a recovery.

For years, America has been known as the country of opportunity and prosperity. Freedom loving people the world over aspire to come here so they can start their own business and become independent, if not wealthy. That is why I support the Start-up Visa Act program. I also think that every student receiving a degree from an accredited US college or university should get a green card as a way of increasing the diversity of start-ups. Immigration has been very, very good for the US economy – that it’s being used as a wedge to divide and distract us is a national disgrace. Here is a short overview of the bill under discussion:

Action item: contact your elected representatives and ask them them to co-sponsor the Small Business Jobs and Credit Act and pledge to allow it come up for a floor vote this session.

Google, eBay, Intel and Yahoo grew into major employers in part due to net neutrality, the principle that keeps the Internet open and free from discrimination. It is vital that the Internet continue to serve as an accessible vehicle for free speech, economic opportunity and civic engagement.

Action item: contact the FCC and ask them them to protect consumer access to the most important communications medium of our time. The FCC must regain its resolve to protect Net Neutrality on wired and wireless networks. Please ask them to keep the Internet open and free of corporate gatekeepers.

While money, infrastructure and labor is cheap, we should also increase our investment in affordable broadband. This investment has the potential to deliver dividends in medicine, education and entertainment as well as commerce and new job creation.

Start-ups won’t create all of 11 million jobs we need, but saner policies such as the four I’ve outlined here can make a significant impact on the pace of new job creation going forward. Stay tuned for a look at additional solutions in the days ahead.

Crafting More Jobs

In a previous post, I highlighted the American dream story of Raleigh Denim.

Raleigh Denim jeans are unique, hand produced jeans sewn in America by people who are paid at least a living wage working in clean and safe conditions. The raw materials are sourced from other North Carolina companies which also employ residents paid for their skill, knowledge and expertise of making premium denim, thread, zippers, labels and buttons. Their jeans are not cheap, but they are built from the best possible locally sourced materials by experts.

This was a conscious choice by Raleigh Denim – Sarah Lytvinenko explains:

The process is as important as the product.

It’s safe to assume that after these folks end their workday they proceed back into their communities where they exchange those earned wages for other goods and services, thereby extending the benefit of the dollars paid for those jeans throughout the North Carolina economy. They are a real world example of what Umair Haque calls the value economy.

Luckily, we’re all invested in Raleigh Denim’s success, because our tax dollars provided the necessary loan for them to create those 14 manufacturing jobs. That is good, because without SBA backed loans, they probably would not have attracted angel or venture funding, most of which flows towards sexier segments such as technology and bio-tech.

I’m at a loss to explain why nobody is jumping into this obviously under-served market – a Y Combinator type seed fund for makers is an untapped well of opportunity.

Government backed loans are at best a band-aid – SBA loans are only available to successful, growing businesses, whereas seed funds such as Y Combinator allow entrepreneurs to test and trial prospective businesses. Until early seed capital is widely available to passionately curious makers like the Lytvinenko’s, we’re in for a rocky recovery. 1,000 similar companies would create 14,000 new jobs, more than ten percent of the 125,000 jobs we need to add monthly to keep up with population growth. It is vitally important to realize and fund job development that benefit everyone, not just the educated few. Just as we need diversity in start-up teams, we also need increased diversity in funded industry sectors.

Next up – job creation solutions.